I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

The SEC has brought out the final rules about conflict minerals as required under the Dodd Frank Act. As far as I can see, and of course I’d welcome being corrected if wrong, the vast majority of electronics manufacturers seem to be entirely unaffected. Indeed, given the huge fuss that was made about conflict minerals ending up in our phones, I cannot see that it actually impacts upon phone companies. Not even upon Apple who were directly canvassed to do something about this problem of conflict minerals.

Which, if I’ve got my interpretation of the rules correct, makes something of a mockery of all the effort by Global Witness and the Enough Project into having these rules written up and passed into law. Whether I am right of course is another matter: unfortunately the SEC office responsible isn’t returning calls as yet on clarification.

The SEC announcement is here and the full report here. The basic point which I think eviscerates the rules is this:

A company is considered to be “contracting to manufacture” a product if it has some actual influence over the manufacturing of that product. This determination is based on facts and circumstances, taking into account the degree of influence a company exercises over the product’s manufacturing.

A company is not be deemed to have influence over the manufacturing if it merely:

Affixes its brand, marks, logo, or label to a generic product manufactured by a third party.

Let’s go back to the beginning here. The basic problem is that certain minerals , the mining of them, have fueled the violence in the Congo in recent years. Militias fight over ownership of the mines, enslave people to mine them and wax fat on the profits from having done so. We cannot just ban exports of these minerals from the area because there are many (many more than those slave camps) entirely legitimate miners in the same areas.

The Enough Project and Global Witness thus came up with the idea that there should be some auditing system. Those who use the metals from these minerals should make sure that they are not using the slave labour provided ones and should tell their customers of this. Or, if they are using the slave labour ones, tell their customers who will, assuredly, reject their products in favour of those of another company.

The metals concerned are tantalum, tungsten, tin and gold. The ores, columbo-tantalite, wolframite, cassiterite and, well, there are many possible gold ores.

OK, excellent. Those actually in the metals business did say many a time that the proposed rules were going about it the wrong way. But Dodd Frank was passed with the necessity for such auditing included and the SEC has now released the detailed rules about what must be done. Rules which, if I am reading them correctly, contain such an enormous loophole that I cannot see how the electronics industry is affected at all. Despite much of the propaganda in favour of the rule being all about how these slave derived metals end up in our phones and other electronics.

That loophole being that one mentioned above, about “generic” products. There is no precise definition of manufacturing in the rules: they deliberately shy away from that, saying that the phrase is well enough understood generally. But let’s use a real world example about one of the metals I know well, tantalum.

Firstly, it is only companies that report to the SEC which need to do the additional work to track their conflict minerals usage. This broadly means those who are listed on any exchange in the US. In the case of tantalum the major usage in the world is capacitors. So the companies that manufacture capacitors out of tantalum would, one would think, need to track their supplies back to make sure they were not (or indeed were, it’s not a ban on using them, it’s just that you must tell people either way) derived from that slave labour. So, Vishay (NYSE), Kemet (NYSE), AUX (NYSE) would have to track the sourcing of their materials. NEC (listed in Japan), Illinois Capacitor (privately owned) would not (not a complete list, just examples). That’s what you would think at least.

Except, I’m not entirely sure about that. For these companies buy in a generic product, tantalum powder, to make those capacitors. They do not “cause it to be manufactured”, nor do they have much influence over how it is made nor how much of it is made. It is a commodity item, a generic. Ta powder of mesh size “x”. There are a number of potential suppliers of this and within the metals trade we would consider it to be one of those generics. So I’m not convinced that the capacitor manufacturers need to sign up to this: and I’m certain that several of the majors, given that they are not listed in the US, absolutely don’t have to so sign up.

Taking it a step further back, there aren’t many companies that are able to process tantalite (or coltan if you prefer) into tantalum. Cabot in the US and they would definitely have to report. HC Stark in Europe, and they’re privately owned so they don’t have to report. Ulba in Kazakhstan is, I think ultimately London listed through ENRC (not quite sure) and thus exempt. Silmet in Estonia is now Molycorp owned so that would have to file and then there are several Chinese firms none of which will be affected. So we really only seem to have captured two of the processors in this net.

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With all due respect, the Dodd Frank conflict minerals provision does not require companies does not require companies to disclose use of slavery (leave that for California’s transparency in supply chains act). It requires them to disclose the use of 4 minerals that were mined from a specific conflict region. VERY different requirements. And the electronics industry program that was launched before the final rules came out is the most effective multi-stakeholder initiative of this complexity I have experienced in 15 years of this work. Please get your facts straight before being so critical. It doesn’t help those working so hard to get this right.

I think you are over simplifying the ruling as well as the responsibilities of the issuers as well as private companies not required to issue a report to the SEC. First of all, electronics OEMs such as Apple and others exert significant influence not only over who manufactures their products for them, but the actual design and the components used in their products. They do not simply pick a finished product out of a contract manufacturers product catalog and put their logo on it.

In addition, “necessary to the functionality of the product” is another criterion for reporting conflict minerals use. In the case of a tantalum capacitor manufacturer, while they may not make the tantalum powder themselves (one or two actually do, and in fact KEMET is the only tantalum capacitor manufacturer to have developed a conflict free vertically integrated tantalum supply chain from the conflict free mine in the DRC, through the manufacture and shipment of the capacitors) the tantalum powder is “necessary to the functionality” of the product thus requiring them to report.

As for the miners: your point is interesting but flawed. At the end of the day someone has to buy the ore and process/smelt it. Therefore, if the product is not conflict free the miners will not have customers, therefore denying them a livelihood.

One more important and probably the most important point: even prior to Congress passing Dodd Frank in December 2010, the electronics industry through the Electronics Industry Citizenship Coalition and Global e-Sustainability Initiative (EICC/GeSI), which represent all the large global electronics OEMs, had gone on record as requiring their suppliers to be conflict free and requiring all tin, tungsten, tantalum and gold smelters to be conflict free per their Conflict Free Smelter (CFS) protocol. To be CFS certified, one has to be audited by a third party to the requirements of the CFS protocol. If a smelter is not CFS certified, there is no one in the electronics supply chain who will do business with them, at least no one who is reputable. So, you may think that the electronics industry will escape the grasp of 1502 but this is not correct, and as a backstop, the requirements of EICC/GeSI not only supersede 1502 but are immensely stronger as 1502 does not state you cannot use non-conflict free minerals it only requires one to document their use.

One last point that perhaps is by now obvious. Concern regarding private companies not needing to report is hopefully a moot point moving forward. To be a supplier to the electronics industry, unless one wants to avoid selling to the big guns, all companies will be caught in the CFS net as everyone in the supply chain will need to show their products flow back to a CFS certified smelter. OK, so this is only for the electronics industry. Hopefully other industries will do the right thing and implement similar programs. For tantalum this is all but assured as there are very few smelters and they all supply the electronics industry.

I hope these comments will help put to rest some of your fears regarding 1502, conflict minerals use and the electronics industry.

I think you are over simplifying the ruling as well as the responsibilities of the issuers as well as private companies not required to issue a report to the SEC. First of all, electronics OEMs such as Apple and others exert significant influence not only over who manufactures their products, but the actual design and the components used in their products. They do not simply pick a finished product out of a contract manufacturers product catalog and put their logo on it.

In addition, “necessary to the functionality of the product” is another criterion for reporting conflict minerals use. In the case of a tantalum capacitor manufacturer, while they may not make the tantalum powder themselves (one or two actually do, and in fact KEMET is the only tantalum capacitor manufacturer to have developed a conflict free vertically integrated tantalum supply chain from the conflict free mine in the DRC, through the manufacture and shipment of the capacitors) the tantalum powder is “necessary to the functionality” of the product thus requiring them to report.

As for the miners: your point is interesting but flawed. At the end of the day someone has to buy the ore and process/smelt it. Therefore, if the product is not conflict free the miners will not have customers, therefore denying them a livelihood.

One more important and probably the most important point: even prior to Congress passing Dodd Frank in December 2010, the electronics industry through the Electronics Industry Citizenship Coalition and Global e-Sustainability Initiative (EICC/GeSI), which represent all the large global electronics OEMs, had gone on record as requiring their suppliers to be conflict free and requiring all tin, tungsten, tantalum and gold smelters to be conflict free per their Conflict Free Smelter (CFS) protocol. To be CFS certified, one has to be audited by a third party to the requirements of the CFS protocol. If a smelter is not CFS certified, there is no one in the electronics supply chain who will do business with them, at least no one who is reputable. So, you may think that the electronics industry will escape the grasp of 1502 but this is not correct, and as a backstop, the requirements of EICC/GeSI not only supersede 1502 but are immensely stronger as 1502 does not state you cannot use non-conflict free minerals it only requires one to document their use.

One last point that perhaps is by now obvious. Concern regarding private companies not needing to report is hopefully a moot point moving forward. To be a supplier to the electronics industry, unless one wants to avoid selling to the big guns, all companies will be caught in the CFS net as everyone in the supply chain will need to show their products flow back to a CFS certified smelter. OK, so this is only for the electronics industry. Hopefully other industries will do the right thing and implement similar programs. For tantalum this is all but assured as there are very few smelters and they all supply the electronics industry.

I hope these comments will help put to rest some of your fears regarding 1502, conflict minerals use and the electronics industry.

I think you are over simplifying the ruling as well as the responsibilities of the issuers as well as private companies not required to issue a report to the SEC. First of all, electronics OEMs such as Apple and others exert significant influence not only over who manufactures their products, but the actual design and the components used in their products. They do not simply pick a finished product out of a contract manufacturers product catalog and put their logo on it.

In addition, “necessary to the functionality of the product” is another criterion for reporting conflict minerals use. In the case of a tantalum capacitor manufacturer, while they may not make the tantalum powder themselves (one or two actually do, and in fact KEMET is the only tantalum capacitor manufacturer to have developed a conflict free vertically integrated tantalum supply chain from the conflict free mine in the DRC, through the manufacture and shipment of the capacitors) the tantalum powder is “necessary to the functionality” of the product thus requiring them to report.

As for the miners: your point is interesting but flawed. At the end of the day someone has to buy the ore and process/smelt it. Therefore, if the product is not conflict free the miners will not have customers, therefore denying them a livelihood.

One more important and probably the most important point: even prior to Congress passing Dodd Frank in December 2010, the electronics industry through the Electronics Industry Citizenship Coalition and Global e-Sustainability Initiative (EICC/GeSI), which represent all the large global electronics OEMs, had gone on record as requiring their suppliers to be conflict free and requiring all tin, tungsten, tantalum and gold smelters to be conflict free per their Conflict Free Smelter (CFS) protocol. To be CFS certified, one has to be audited by a third party to the requirements of the CFS protocol. If a smelter is not CFS certified, there is no one in the electronics supply chain who will do business with them, at least no one who is reputable. So, you may think that the electronics industry will escape the grasp of 1502 but this is not correct, and as a backstop, the requirements of EICC/GeSI not only supersede 1502 but are immensely stronger as 1502 does not state you cannot use non-conflict free minerals it only requires one to document their use. CFS certification is all but complete for the tantalum supply chain and now moving on to the other metals.

One last point that perhaps is by now obvious. Concern regarding private companies not needing to report is hopefully a moot point moving forward. To be a supplier to the electronics industry, unless one wants to avoid selling to the big guns, all companies will be caught in the CFS net as everyone in the supply chain will need to show their products flow back to a CFS certified smelter. OK, so this is only for the electronics industry. Hopefully other industries will do the right thing and implement similar programs. For tantalum this is all but assured as there are very few smelters and they all supply the electronics industry.

I hope these comments will help put to rest some of your fears regarding 1502, conflict minerals use and the electronics industry.

“In addition, “necessary to the functionality of the product” is another criterion for reporting conflict minerals use.”

“They do not simply pick a finished product out of a contract manufacturers product catalog and put their logo on it.”

You seem to be reading the rules as if if only one of them applies then companies must report. I’m reading it the other way, in that all must apply for companies to have to report.

Are you buying an off the shelf component? Yes. Then do not report.

If you are “manufacturing” (ie, including the significant influence over design) then is the mineral necessary? No, do not report, yes, do report.

And I’m afraid that capacitors are indeed off the shelf components. These are not things that Apple or any other final equipment manufacturer has any design influence over.

As to this:

“One more important and probably the most important point: even prior to Congress passing Dodd Frank in December 2010, the electronics industry through the Electronics Industry Citizenship Coalition and Global e-Sustainability Initiative (EICC/GeSI), which represent all the large global electronics OEMs, had gone on record as requiring their suppliers to be conflict free and requiring all tin, tungsten, tantalum and gold smelters to be conflict free per their Conflict Free Smelter (CFS) protocol. To be CFS certified, one has to be audited by a third party to the requirements of the CFS protocol.”

That just shows that the Dodd Frank rules are entirely unnecessary, doesn’t it? As the problem was already being solved without legislation?